Sources of regulation
There is a hierarchy of sources of law concerning termination of employment
in the Philippines. Art. 2 (18) of the Constitution affirms labour as a primary social
and economic force and mandates the State to protect workers’ rights and
welfare. Workers have the right to security of tenure under art. 13
(3) of the Constitution. Pursuant to these guiding principles, Book
Six of the 1974 Labour Code (LC),[1] as amended, sets out specific
provisions governing termination of employment (arts. 278-287, LC).
Moreover, there are Rules and Policy Instructions for implementing the
provisions of the LC on questions of termination of employment. The Civil
Code (CC) is also applicable in certain situations.
Scope of legislation
The provisions of the LC governing termination of employment apply to all private
sector employees, whether employed by a profit-making enterprise or not
(art. 278, LC). The Civil Service Law, rules and regulations, however,
cover those employed in the public sector.
Security of tenure (art. 279, LC) – the right not to be removed from
a job without valid cause and procedure – extends to regular (permanent)
and non-regular (temporary) employment,[2] managerial and rank and file
employees alike.[3] Probationary employees also
enjoy security of tenure.[4]
Contracts of employment
Contracts of employment are imbued with public interest.[5] There are four tests to ascertain
the existence of an employer-employee relationship:
- Manner of selection and engagement;
- Payment of wages;
- Presence or absence of the power of dismissal; and
- Presence or absence of the power of control.[6]
Of the four tests, the last one – control by the employer of the means, methods and manner by which
the work is performed by the employee – is the most important.[7]
Art. 280 of the LC provides for the following categories of
employment:
- Project - where the employment has been fixed for
a specific project or undertaking, the completion or termination of
which has been determined at the time of the engagement of the employee;
- Seasonal - where the work or services to be performed
is seasonal in nature and the employment is for the duration of the
season; and
- Casual - where the employment is not covered by
the foregoing, provided that an employee who has rendered at least
one year of service, whether continuous or broken, shall be considered
regular
with respect to the activity in which he or she is employed and his
or her employment shall continue while the activity exists.
Another category of employment recognized in jurisprudence is “term”
or “fixed-period employment.” This is based on art. 1193 of the
CC, which states that obligations with a resolutory period take effect
at once, but terminate upon arrival of the day certain – understood
to be a day that must necessarily come. The decisive determinant in “term
employment” should not be the activities that the employee is called upon
to perform, but the day certain agreed upon by the parties for the
commencement and termination of the employment relationship.[8] Stipulations in employment contracts providing
for “term employment” or “fixed-period employment” are valid when the period
has been agreed upon knowingly and voluntarily by the parties, without
force, duress or improper pressure exerted on the employee, and when such
stipulations were not designed to circumvent the laws on security of tenure.[9]
Probationary employment is not necessarily a category of employment. It pertains
to a period of time. Under art. 281 of the LC, probationary employment
shall not exceed six (6) months. An employee who is allowed to work after
a probationary period shall be considered a regular employee. A probationary
employee is, for a given period of time, under observation and evaluation
to determine whether or not he or she is qualified for permanent employment.[10] During
the probationary period, the employer is given the opportunity to observe
the skills, competence and attitude of the employee while the latter seeks
to prove to the employer that he or she has the qualifications to meet
the reasonable standards for permanent employment.[11]
Termination of employment
Under art. 3 (18) of the Constitution,
no involuntary servitude in any form shall exist except as punishment for
a crime whereof the party shall have been duly convicted. In
view of the prohibition on involuntary servitude, an employee is given
the right to resign under art. 285 of the LC. The provision recognizes
two kinds of resignation – without cause and with cause. If the resignation
is without cause, the employee is required to give a 30-day advance written
notice to the employer, to enable the employer to look for a replacement
to prevent work disruption.[12] If the employee fails to give
a written notice, he or she runs the risk of incurring liability for damages.
The same provision also indicates the just causes for resignation (with
cause) –
- Serious insult to the honor and person of the employee;
- Inhuman and unbearable treatment;
- Crime committed against the person of the employee or any of the immediate
members of the employee’s family; and
- Other analogous causes.
In this second type of resignation, the employee need
not serve a written notice.
Forced resignation is not allowed and is considered “constructive” dismissal
– a dismissal in disguise.[13]
Employee retirement is either voluntary or compulsory under art. 287 of
the LC.
Dismissal
An equality of rights exists between employer and employee. While the employer
cannot force the employee to work against his or her will, neither can
the employee compel the employer to continue giving him or her work if
there is a lawful reason not to do so. Thus, the employer may terminate
the services of an employee for just or authorized causes after following
the procedure laid down by law, but the employer has the burden of proving
the lawfulness of the employee’s dismissal in the proper forum.[14]
Just causes are blameworthy acts on the part of the employee such as serious
misconduct, willful disobedience, gross and habitual neglect of duties,
fraud or willful breach of trust, commission of a crime and other analogous
causes (art. 282, LC).
Authorized causes are of two types – business reasons and disease. The business
reasons are installation of labour-saving devices, redundancy, retrenchment
and closure or cessation of operation (art. 283, LC). Before the
employer can terminate on the ground of disease, he must obtain from a
competent public health authority a certification that the employee’s disease
is of such a nature and at such a stage that it can no longer be cured
within a period of six months even with medical attention (art. 284, LC;
Implementing Rules of Book VI, LC).
Those hired on a temporary basis, that is, for a “term” or “fixed
period” are not regular employees, but are “contractual employees.”[15] Consequently, there is no illegal dismissal when
their services are terminated by reason of the expiration of their contracts.[16] Lack of notice of termination is of no consequence,
because a contract for employment for a definite period terminates by its
own term at the end of such period.[17]
An illegal strike can be cause for termination of employment.[18]
Employment is not deemed terminated when there is a bona fide suspension
of the operations of a business or undertaking for a period not exceeding
six (6) months, or when the employee fulfills a military or civic duty
(art. 286, LC).
Under the Corporation
Code (sec. 80), the surviving or consolidated
entity in a merger or consolidation automatically assumes all rights and obligations, assets and
liabilities of the combining entities. This includes obligations or liabilities under valid agreements,
like labour contracts. The surviving or consolidated entity must, therefore, recognize
the security of tenure and length of service of the workers of the merging or consolidating corporations.[19] By the fact of merger or consolidation, a succession of employment rights and obligations occurs.[20]
Notice and prior procedural safeguards[21]
As stated above, dismissals based on just
causes contemplate acts or omissions attributable to the employee while
dismissals based on authorized causes involve grounds – business or health
– allowing the employer to terminate. A termination for an authorized cause
requires payment of separation pay. When the termination of employment
is declared illegal, reinstatement and full backwages are mandated under art.
279 of the LC. If reinstatement is no longer possible where the dismissal
was unjust, separation pay may be granted.
Procedurally, (1) if the dismissal is based
on a just cause under art. 282 of the LC, the employer must give
the employee two written notices and a hearing or opportunity to be heard
before terminating the employment, that is, a notice specifying the grounds
for which dismissal is sought and, after hearing or opportunity to be heard,
a notice of the decision to dismiss; and (2) if the dismissal is based
on authorized causes under arts. 283 and 284 of the LC, the
employer must give the employee and the Department of Labour and Employment
written notices 30 days prior to the effectivity of the separation.
Severance pay
As already noted, separation pay is required
to be paid to the employee when there is termination of employment by the
employer for an authorized cause, the amount of which depends on the cause.
If the termination is due to the installation of labour-saving devices
or redundancy, the separation pay is one month’s pay for every year of
service or one month pay, whichever is higher (art. 283, LC). If
the termination is due to retrenchment to prevent losses, or closure or
cessation of operation of the establishment not due to serious business
losses, or due to disease, the separation pay is one-half month’s pay for
every year of service or one month pay, whichever is higher (arts. 283
and 284, LC). However, there is no requirement for separation pay if
the closure is due to serious business losses.[22]
Avenues for redress
From the foregoing, four possible situations may be derived: (1) the dismissal
is for a just cause under art. 282 of the LC, or for an authorized cause
– business reason under art. 283 or health reason under art. 284 – and due
process was observed; (2) the dismissal is without just or authorized cause
but due process was observed; (3) and there no process; (4) for a not observed. [23]
In the first situation, the dismissal is
undoubtedly valid and the employer will not incur any liability,[24] save for separation pay when
the dismissal is for an authorized cause.
In the second and third situations, where
the dismissals are illegal, art. 279 of the LC mandates that the
employee is entitled to reinstatement without loss of seniority rights
and other privileges and full backwages, inclusive of allowances, and other
benefits or their monetary equivalent computed from the time the compensation
was not paid up to the time of actual reinstatement.[25]
In the fourth situation, the dismissal should
be upheld.[26] While the procedural infirmity
cannot be cured, it should not invalidate the dismissal.[27] However,
the employer should be held liable for nominal damages for non-compliance
with the procedural requirements of due process.[28] If the dismissal is for an authorized cause,
the employee is also entitled to separation pay.[29]
Compulsory arbitration of illegal dismissal
cases is conducted by the Labour Arbiters of the National Labour Relations
Commission and their decisions are appealable to the Commission (arts.
217 and 218, LC).
In view of the stated preference for voluntary
modes of settling labour disputes under art. 13 (3) of the Constitution
and art. 211of the LC, voluntary arbitration of illegal dismissals
is recognized on the basis of mutual agreement between the parties (art.
262, LC).
Compulsory arbitration is both the process of settlement of labour
disputes by a government agency which has the authority to investigate
and issue an award binding on all the parties, as well as a mode of arbitration
where the parties are compelled to accept the resolution of their dispute
through arbitration by a third party.[30]
While a voluntary
arbitrator is not part of the labour department, he or she renders arbitration
services provided for under labour laws.[31] Generally, the voluntary arbitrator is expected
to decide only questions that are expressly delineated by the submission
agreement.[32] However, since arbitration is the final resort
for the adjudication of disputes, the arbitrator can assume that he or
she has the power to make a final settlement.[33] Thus, assuming that the submission agreement
empowers the arbitrator to decide whether an employee was discharged for
just cause, the arbitrator can reasonably assume that his or her powers
extend beyond giving a mere yes-or-no answer and include the authority
to reinstate with or without back pay.[34]
Further information
[1] Chan Robles Virtual Law Library: full text of the Labor Code of the Philippines - Book Six
[2] Kiamco v. National Labour Relations Commission, G.R.
No. 129449, June 29, 1999.
[3] Maglutac v. National Labour Relations Commission, Commart
(Phil.) Inc., G.R. No. 78345, September 21, 1990; Philippine Long
Distance Telephone Co. et al. v. Arturo Raymundo Tolentino, G.R. No. 143171, September 21, 2004.
[4] Radin C. Alcira v. National Labour Relations Commission
et al., G.R. No. 149859, June 9, 2004.
[5] Philippine Airlines, Inc. v. Joselito Pascua et al.,
G.R. No. 143258, August 15, 2003.
[6] Empermaco B. Abante, Jr. v. Lamadrid Bearing & Parts
Corp. et al., G.R. No. 159890, May 28, 2004
[7] ibid.
[8] Brent School v. Zamora, 181 SCRA 702.
[9] ibid.
[10] Florencio M. De La Cruz, Jr. v. National Labour
Relations Commission, G.R. No. 145417, December 11, 2003.
[11] ibid.
[12] Intertrod Maritime, Inc.
v. National Labour Relations Commission, 198 SCRA 318.
[13] C.A. Azucena. The Labour Code with Comments and Cases, 751
(2004).
[14] Bolinao Security and Investigation Service, Inc. v. Toston,
421 SCRA 406.
[15] Rosita Pangilinan et al. v. General Milling Corporation, G.R. No. 149329, July
12, 2004
[16] ibid.
[17] ibid.
[18] Reliance Surety and Insurance Co., Inc. v. National Labour
Relations Commission et al., G.R. Nos. 86917-18, January 25, 1991.
[19] Filipinas Port Services, Inc. v. National Labour Relations
Commission et al., G.R., No. 97237, August 16, 1991.
[20] ibid.
[21] Drawn from Agabon et al. v. National Labour Relations Commission
et al., G.R. No. 158693, November
17, 2004.
[22] North Davao Mining Corporation v. National Labour Relations
Commission et al., G.R. No. 112546, March
13, 1996.
[23] Agabon et al. v. National Labour Relations Commission
et al., G.R. No. 158693, November 17, 2004.
[24] ibid.
[25] ibid.
[26] ibid.
[27] ibid.
[28] ibid.
[29] San Miguel Corporation v. Prospero A. Aballa et al., G.R. No. 149011, June
28, 2005.
[30] Ludo & Luym Corporation v. Ferdinand Saornido et al., G.R. No. 140960, January
20, 2003.
[31] ibid.
[32] ibid.
[33] ibid.
[34] ibid.
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